Product distribution is no doubt a critical element in a brand's success or failure. However, setting up an effective network of regional distributors continues to be a challenge even among large suppliers. Finding the right distributor partners is not an easy task. But before we jump into finding your potential distributor partners, here are some important items you need to know.
 
Have you identified your target customer segments? Customer segmentation entails categorizing potential customers into like or discrete groups based on common characteristics. You may segment your target customers based on: who the customer is (e.g., high school students, supermarkets, government institutions); what the customer does (e.g., current customers, lost customers, early adopters); or what the customer needs (e.g., how the customer prefers to buy, or the amount of help they require).
 
Segmentation enables marketers to design a targeted sales and marketing strategy that best fits the segments' requirements. Identifying segments and measuring their potential produce insights and opportunities that would otherwise be overlooked and avoid costs that would otherwise be spent chasing low potential opportunities.
 
Do you have a clear roadmap for each of your distributors? One common mistake of manufacturers is to assume it is the duty of third party distributors to develop the territory plans and strategies. Your distributors must be treated as extensions of your company. They are unlike wholesalers who purchase the products they want and sell them anywhere. You are the strategy provider and distributors execute your strategies. You cannot have a one-size-fits-all sales strategy if you want to remain competitive in the market.
 
The first thing to do is to conduct a SWOT analysis of each territory to understand and find out the best distribution models and types of coverage to use to ensure that all targeted channel segments are effectively covered. This step requires you to know the number of customers per type of channel per area and the potential sales contribution.
 
Have you developed a distributor selection criteria? Another common mistake in setting up a network of distributors is the absence of robust distributor selection criteria. If you do not guide your sales team in what type of distributor to look for, you could end up with the wrong distributor partners. The first step is to set up a committee tasked to select the right distributor candidates, which should be headed by your sales manager.
 
The profile of distributor partners you want are those who are capable of executing the strategies set during the customer segmentation process. Most companies just look at financial capability as the criterion. I knew of a personal care products manufacturer who engaged with a large distribution company with undoubtedly strong financial and organizational capabilities. However, its anemic coverage and trade rapport in personal care channels (e.g., Watsons) consequently jeopardized the brand's strategies in this very important segment.
 
Where will you source distributor candidates? The agreed selection criteria should assist the sales people in knowing the most appropriate distributor candidates to target. This actually saves your company a lot of resources. Apart from your own database, you may source candidates from referrals of other suppliers and trade customers per territory. You may also want to advertise in the regional newspaper or local radio stations.
 
Do you have a distributor contract? It is extremely important that you develop a distributorship agreement or contract that details key performance areas and metrics. It is always helpful in any relationship to discuss expectations before you engage. In this case, write them in a distributor contract or agreement. There are sample documents you can download from the Internet. However, since those contracts are not tailored to your specific business, you should have this agreement reviewed and approved by a qualified lawyer before using it.
 
Emilio Bong Macasaet III is partner and chief distribution strategist of Mansmith and Fielders, Inc. (www.mansmith.net), the leading marketing and sales training company in the Philippines.For inquiries, please e-mail info@mansmith.net, call (+63-2) 584-5858 /412-0034 or text (63) 918-81-168-88. Please also send your strategy, marketing and sales questions to mentors@mansmith.net.


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